European shares were firmly in the red on Tuesday as the optimism about US-China trade talks that swept stocks to fresh October highs cooled, with London's FTSE 100 lagging the broader markets as the sterling rallied.

The pan-European STOXX 600 was down 0.2 per cent by 0842 GMT, in line with France's CAC 40 and Germany's trade-sensitive DAX. The index closed at its highest level since October 9 on Monday.

The FTSE 100 was down 0.7 per cent as sterling rallied to one-month highs after reports that Prime Minister Theresa May is considering delaying the March 29 deadline for the country's exit from the European Union. An announcement could come as soon as Tuesday.

The blue-chips hit their lowest since February 11 in early deals. With the majority of its companies' income coming from abroad, the FTSE 100 is often pressured by a stronger pound.

Broader enthusiasm over trade talks cooled. Even though US President Donald Trump said he would delay a tariff hike on $200 billion of Chinese imports in the clearest sign yet that both sides were making progress, he also said a deal had not yet been sealed and there was still a lack of detail on what emerged from the Washington talks.

Among individual moves, Denmark's Jyske Bank was the biggest faller on the STOXX 600 after its results, while Peugeot owner PSA was on track for its worst day since December as investors locked in profits after the French carmaker's record results. Slightly weaker-than-expected sales also weighed.

Shares in IAG, which owns British Airways and Iberian Airlines, were down 3.7 per cent in London and the biggest decliner on Madrid's IBEX after index provider MSCI said it plans to delete the stock from its Spain index.